More clarity on monetary policies pushes market up

During October the Fund reported a gain of +1.30% on an absolute basis. Year to date the Fund has posted a positive return of +23.43% on an absolute basis; an outperformance of +11.38% versus its benchmark.

Monthly Fund Commentary

24 Nov 2017

During October the Fund reported a gain of +1.30% on an absolute basis. Year to date the Fund has posted a positive return of +23.43% on an absolute basis; an outperformance of +11.38% versus its benchmark.

The month October provided some clarity for market participants regarding the future direction and timing of monetary policies. The Fed confirmed its normalisation plans, while the ECB unveiled details about its tapering actions. Both appeared in line with expectations and without major disruptions. As a result, the Fund’s benchmark gained 1.91% over the month.

Mersen was the largest monthly contributor to the Fund’s performance, followed by Mauna Kea and Vexim. Following strong Q3 numbers, Mersen raised its 2017 financial objectives in October for the second time this year, post an initial revision in early July.

Compared to the beginning of the year, organic growth is seen at 7-8% (vs. 0-2% announced in March), while the operating margin should improve by 150-170bps (vs. 50-100 bps initially).

As a result, the stock price almost doubled over the course of this year. Throughout the month, Mauna Kea also performed strongly with a +87.4% monthly return due to the Company publishing a decent Q3 report and announcing the nomination of a deputy CEO. During October, Strikerannounced its intention to acquire Vexim, a promising MedTech company, with a 29% premium. The Investment Adviser started building a position in February 2016 with an average entry price of €9.74. The price at takeover (€20) will mean a 105% return over 18 months, once the position has been tendered to the offer.

At the other end of the spectrum, Boozt, Granges and Lisi were the three main detractors. Boozt continued to suffer from potential competition in the Nordics from Amazon and Zalando. The Investment Adviser believes that the positioning of the Company and its logistics organisation will immunise the Company against the additional competition. Granges and Lisi did not move throughout the month as a result of news releases, rather from profit taking by investors.

In October, two new (Swiss) positions were added to the portfolio. The Investment Adviser will provide more information on said positions after they have reached the desired weighting within the portfolio.

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The views and statements contained herein are those of Pascal Investment Advisers SA in their capacity as Investment Adviser to the Fund as of 11/10/17 and are based on internal research and modelling.